Proceedings of the Standing Senate Committee on
National Finance
Issue 17 - Evidence
OTTAWA, Tuesday, October 28, 2003
The Standing Senate Committee on National Finance, to which was referred Bill C-212, respecting user fees, met this day at 9:32 a.m. to give consideration to the bill.
Senator Joseph A. Day (Deputy Chairman) in the Chair.
[English]
The Deputy Chairman: This morning, we are beginning our committee hearings on a private member's bill, Bill C- 212. This bill was referred to the committee on Wednesday, October 22 of this year, and this is the committee's first hearing on the bill. I am very pleased to introduce to you the sponsor of the bill in the House of Commons, and the person whose inspiration resulted in the bill, Mr. Roy Cullen, who is the Member of the House of Commons from Etobicoke North. I understand, Mr. Cullen, that you will make a presentation this morning — we have all been provided with a copy — and then we will open the meeting up for questions. We thought we would have approximately three-quarters of an hour for your presentation.
Mr. Roy Cullen, M.P., Etobicoke North: I am pleased to have this opportunity to present my private's member's bill, Bill C-212, an act respecting user fees, to this committee. The intent of the proposed legislation is to bring greater transparency, accountability and parliamentary oversight to federal government departments and agencies when they attempt to recover costs through user fees. User fees take many different forms and are meant to defray some or all of the costs of a service provided by government, presumably in the public interest, but which also provide a specific service to the client — for example, licence fees and registrations, et cetera.
[Translation]
At the outset, I should say that I support the government's objective to recover costs through user fees for private goods or proprietary services. My bill addresses the following list of concerns.
[English]
First is the need to link the amount charged as user fees with the ability of a department or agency to meet agreed-to performance standards. Second is the need for greater stakeholder participation in the fee-setting process. Third is the requirement for more comprehensive stakeholder impact and competitiveness analysis when new user fees or fee increases are contemplated. Fourth is the goal of increased transparency as to why fees are applicable, what fees are charged, what costs are identified as recoverable, what private benefits are being conferred and whether performance standards are being met. Fifth is the need for user fees to be internationally competitive. Sixth is the need for more parliamentary oversight when user fees are introduced or changed.
[Translation]
Seven, the need for an independent dispute resolution process to address the complaints or grievances of the payers of user fees; and eight, the need for an annual report outlining all user fees in effect.
[English]
Mr. Chairman, our government has embarked on an ambitious innovation agenda. We need to ensure that our regulatory environment supports and encourages this important objective. The government recognized this connection when it launched the smart regulation initiative in the recent Throne Speech. The government announced it will ``move forward with a smart regulation strategy to accelerate reforms in key areas to promote health and sustainability, to contribute to innovation and economic growth and to reduce the administrative burden on business.''
I would suggest, honourable senators, that the government's current cost-recovery user-fee policy runs counter to the innovation agenda and should be a major part of the smart regulation initiative. Bill C-212 accomplishes that, in my view.
What began as a legitimate attempt to more fully recover costs for proprietary services has developed into something beyond that which was contemplated. User fees currently bring in $4 billion annually in revenues for the federal government. Departments and agencies of the federal government have, in many cases, expanded the concept and introduced user fees and increased user fees beyond what is reasonable — and more often than not, without any reference to service or performance. Let us keep in mind, these are monopolies increasing their prices. If a company wishes to have a drug approved, for example, they cannot shop around if the price charged by Health Canada is excessive.
[Translation]
The result of this process is that departments and agencies are highly motivated to introduce, and increase, user fees beyond what was originally intended. There is a systemic incentive to generate high volumes of these fees. It is time to introduce more transparency and accountability into this process.
[English]
Companies in my riding of Etobicoke North, for example, companies like Bayer Canada and BASF Canada, who are exposed to such fees for drug approvals or approvals of chemical products do not argue against the appropriateness of user fees for proprietary services. They understand this is required. However, they believe that increasing fees with no corresponding increase in service or performance is seriously eroding their competitiveness. Since fees have been on the rise, in most cases, there has been no corresponding improved service or response times.
In Canada, for example, it takes, on average, 750 days for a drug to be approved. In the United States, the corresponding time is 500 to 550 days. In Europe, the time frame is less.
User fees are higher in Canada compared to these jurisdictions. Competitive advantage often depends on being the first mover to the marketplace. It is easy to understand why our Canadian companies are seeing their competitive position eroded.
[Translation]
In the United States, the United Kingdom and Australia, user fees are ties in some way to service and performance. The Government of Canada does not at present have any such linkage to performance. In Australia, drug reviews must be completed within legislated time frames or the relevant authority loses up to 25 per cent of the user fee.
[English]
In the United States, written performance goals tied to the fee-collecting authority were negotiated with the industry. The Medicines Control Agency in the United Kingdom sets targets for clearance times. I should point out that many performance standards, such as in Health Canada for drug approvals, have been negotiated and worked out with the industry. They have gone through an elaborate activity to isolate the costs of getting a drug approved and set reasonable benchmarks while respecting that there can be no compromise with respect to the safety of Canadians. Health Canada has committed to those but not come close to meeting them. Bill C-212 potentially affects Canadians from coast to coast because it applies to federal government departments, agencies, boards, commissions or any other body that has the power to fix a user fee or a cost-recovery charge under the authority of an act of Parliament. It no longer applies to Crown corporations.
Individuals pay fees to visit a federal park, passengers pay the Air Travellers Security Charge, individuals pay for a passport, provincial or territorial authorities pay the Canadian Coast Guard for ice-breaking services and small businesses pay fees for access to the government procurement system known as MERX, which used to cost $5 a month and now costs $30 a month. They do not understand the increase, which has a big impact on small business.
I have introduced this bill because of the level of frustration with the lack of progress on this issue. The House of Commons Standing Committee on Finance recommended significant changes to the cost-recovery user-fee policy in 2000, but progress has been minimal. There are concerns that it may be moving in the opposite direction.
Bill C-212 will require that before a federal regulating authority introduces, increases or expands the application or duration of a user fee, it must consult meaningfully with affected stakeholder and client groups. It must take reasonable measures to notify clients and other regulating authorities with a similar clientele of the proposed user-fee charges. Under Bill C-212, every user-fee proposal must be tabled in Parliament and referred to a committee by the relevant minister. The bill would require the minister to: First, explain in respect of what service, facility, authorization permit or licence the user fee is being proposed; second, state the reason for any proposed change in the user fee rate; third, outline what performance standard is proposed as well as the actual performance level reached; fourth, provide an estimate of the total amount that the regulating authority will collect in the first three years and identify the cost that the user fee will recover. Should the amount of the user fee being proposed be higher than that existing in another country that is a major trading partner of Canada, the minister would be required to give reasons for the difference.
I believe these questions are very important for the competitiveness of Canadian business. Bill C-212 has broad support across a wide spectrum. It is supported by the Business Coalition on Cost Recovery, made up of organizations covering a broad spectrum of interests across Canada. This group employs collectively over 2.2 million Canadians and is directly responsible for over $330 billion in economic activity annually. It includes organizations such as the Canadian Federation of Independent Business, who told me a year ago that this was their top priority in terms of seeking changes.
[Translation]
These are serious organizations employing thousands of Canadians across Canada. These organizations support this bill because it is the right thing to do. It will encourage companies to make investments and create jobs. Bill C-212 will enhance Canada's competitiveness and advance our country's innovation agenda.
[English]
When members of the Senate vote on Bill C-212 they will have a very clear choice. Continue to deal with user fees through government policies, albeit in an enhanced policy environment because of changes made by the government, or embrace the legislative approach proposed in Bill C-212. I submit that this bill is the preferred route for the following reasons: First, federal government user fees that currently generate $4 billion annually in revenue, while not taxes per se, are akin to taxes and need the scrutiny of Parliament. Second, the same fees are priced by monopolies, by officials in departments and agencies, with limited input from parliamentary representatives. Third, the policy approach to user fees has not worked in the past and is not working now. There is little likelihood that this approach will produce the needed results in the future.
The Treasury Board can have the most excellent policy on the books, but if the departments and agencies do not follow it or it has no teeth, you can understand why we do not get results.
Some have said that users are generally satisfied with the government's cost-recovery user-fee policy. This is not consistent with the facts before us. The vast majority of users are not happy, nor do they have confidence that the government's new policy will make any real difference.
[Translation]
Bill C-212 builds in consequences should departments or agencies fail to meet their performance targets by more than 10 per cent. In jurisdictions like the United States and Australia, where user fees and performance are linked, service standards are met close to 100 per cent of the time. The same will occur here in Canada if Bill C-212 is adopted. The end result will be a more innovative and competitive economy and better service to Canadians.
[English]
To enhance the bill, I introduced a number of amendments in the House of Commons at committee stage in response to feedback and comments. Some of these changes were minor in nature but others were more significant. I will comment on the latter. Some individuals were concerned that the bill as originally written will compromise the ability of government to implement policies because the House of Commons would have a veto power over user fees or any increase in fees. The amended bill removes the veto power of the House of Commons and replaces it with a recommending authority. In lieu of this, however, penalties for non-compliance with standards by departments and agencies have been written into this bill. The amended bill is less centred on the House of Commons. It is based on the need for performance, and there are consequences if performance standards are not met. This is a generic principle of the bill. I think this still gives the bill the teeth we need but removes the concern about machinery of government issues.
Mr. Chairman, Crown corporations were included in the original bill. They were removed in recognition of commercial orientation. In the context of the independent dispute-resolution process described in the bill, the word ``reasonable'' has been inserted to eliminate frivolous complaints about user fees.
I have talked to users and expressed my interest in making sure that any dispute mechanism is not inundated with frivolous complaints, and I would be the first to recommend scrapping the provision if it is used in that way, but I believe users will act responsibly. Right now, they feel they have no real recourse if there is a lack of performance standards.
The government has come a long way in introducing a new policy and I thank the President of the Treasury Board for that.
However, in my judgment, the revised policy falls well short in the following key areas: First, the new policy lacks teeth to deal with the departments and agencies that fail to meet stated performance standards. There will be a monitoring unit within the Treasury Board Secretariat, but the amount of resources attached to it is unknown. Additional memos and meetings might prove to be positive in terms of getting results, but I am not sure that would be the case. Under my bill, there would be real consequences if standards were not met.
Second, while the new policy improves the process for resolving disputes between users and federal government departments and agencies, it is still an internal one, with an appeal process through the department. Basically, it goes up through the same channels, and ministers, deputies and other senior officials are briefed accordingly. Users have made no progress when seeking this avenue.
Third, Bill C-212 explicitly states that user fees are appropriate when private benefits are conferred; otherwise, they are clearly taxes. The government policy is silent on this point and users are concerned that government may be moving in a different direction. These are the major differences between Bill C-212 and the new government policy. Again, honourable senators, I believe the choice is clear. I urge you to support Bill C-212; if you do, you will be supporting accountability and transparency. Thank you.
Senator Comeau: I have one quick point, which is not a complaint, by the way, but an observation. I noted that you used the words ``parliamentary oversight'' in your presentation, but in fact, as I read the bill, it is actually House of Commons oversight, because the Senate does not take any part in the process once the bill becomes law. I just wanted to clarify that the Senate has no role in such an oversight.
Was that fact given any consideration?
Mr. Cullen: Yes, it was. In retrospect, perhaps I should have focused more on that. However, when I introduced amendments in the House of Commons Finance Committee, I felt that the bill was less House-of-Commons-centric. Currently, a committee can review anything it chooses. In fact, the argument was made to me that this information has to be tabled in the House of Commons, whereas any information can be tabled and a committee can do any work it wishes. I am certain that the same applies in the Senate.
Senator Comeau: No, it does not work that way in the Senate. An order of reference from the Senate is required for a committee to look at a specific subject. Unless it is tabled in the Senate, it probably would not even reach us.
Mr. Cullen: The Senate committee cannot do a study of its own accord?
Senator Comeau: No.
Mr. Cullen: When I was working with the Minister of Finance on the bank merger bill, C-8, we built in a role for the Senate; and that was important. At the time, I canvassed people for advice and was told that because this bill was not particularly House-of-Commons-centric, and given the changes, it would probably need an explicit reference to the Senate. However, I take your point.
Senator Comeau: It is actually an observation. I do not think we are looking for work because we have enough on our plate right now. However, one point does somewhat concern me, and you mentioned it in your opening comments. I agree with you that these are taxes, and when we talk about taxes, we are referring to both Houses. Eventually, whether government increases taxes or creates new taxes other than under an income tax bill, they are still taxes, and that worries me. We would not want the Senate removing itself from the taxation function of government because we are part of the process. I raise this as an observation more than a complaint.
Mr. Cullen: With the benefit of hindsight, I understand your comments on this. I do not know what else I can say.
The main provisions of the bill lay out what the government has to do if it wants to introduce a new fee or an increase. It has to go through that process and table that report. It was pointed out to me that if it were referred to a committee, there would be an obligation to review this; and none of the committees are looking for work. Therefore, I introduced an amendment such that if the House did not hear back within 40 days, it would be deemed that the committee had no particular problem with the fee.
The meat of the bill lies in the fact that these requirements have to be met and, if there is a failure to meet the performance standard, there are consequences, but I do take your point.
Senator Comeau: It is my understanding that when increases are proposed or new taxes are levied, the minister would have to table the report. Then, if any major changes were made, the minister would have to appear before a committee and table the documents with the House of Commons. When a minister tables a document in both Houses, it is actually referred to one of the committees, if I understand correctly. That may be one way. For example, if I sat on the Fisheries Committee and the Minister of Fisheries and Oceans decided to substantially increase Coast Guard fees, I would obviously be affected because it would impact the communities in which I am interested. Thus, I might want to have the document referred to the Fisheries Committee. That could be a way to access the document. Under the bill as it stands, we would not have such access.
Mr. Cullen: That is right and I appreciate that comment. The bill states that the minister, if he or she wanted to introduce a new fee or an increase, would have to table something in the House of Commons that would outline all the details, such as why the fees are required, what costs are being recovered, whether it is competitive with our trading partners, the dispute-resolution mechanism, the attitude of the users, et cetera. It would automatically then be referred to a committee. In the House of Commons, there was concern that they would all be referred to the Finance Committee, and this decision is the prerogative of the House. It is my sense that if it were a health fee, it would go to the Health Committee; if it were a fisheries fee, it would go to the Fisheries Committee. My bill currently puts no obligation on the committee to do any work. If 40 days pass and they have done no work on it, then it is deemed acceptable to the committee.
Senator Comeau: We all want government taxes to continue to be scrutinized by Parliament. I think your bill attempts to do this and I applaud the objective. However, I raise the concern that if these fees are taxes, and I agree that they are, then we have to be careful that they remain under parliamentary scrutiny.
Senator Finnerty: Mr. Cullen, would enacting the principles of Bill C-212, as opposed to placing them in policy, open departments and agency user-fee programs to legal challenge? How would this complicate the fee-setting process? The Treasury Board Secretariat has suggested that the courts, and not Parliament, should be the final arbitrator of the user-fee program.
Mr. Cullen: I have heard this argument and I have trouble accepting it. Bill C-212 does something different, in that it stipulates the criteria under which a department or agency could introduce a new fee or an increase in fees. If a minister in his or her wisdom tables something that does not deal with those questions, there could be a legal challenge. In fact, many of the criteria in my bill are already in current government policy, and I have acknowledged that.
The only other aspect of it is the independent dispute-resolution mechanism. At the committee stage, the department said they were concerned that how that process would work was not exactly spelled out in the proposed legislation. I reminded them that when the officials come to our committees, and perhaps to your committees as well, we often hear how certain things cannot be set out in legislation because there is far too much detail, and that they will be in regulations. I am sure you, as parliamentarians, have the same frustrations we have in the House of Commons. I found the argument a little hypocritical.
The process of the independent mechanism will have to be set by regulation and there is, frankly, too much detail to put in the bill. However, if you are asking for my concept of how it will work, if there is a serious impasse between a department or agency and the user — either the performance standard is not competitive with trading partners or the costs to be recovered are beyond reasonable — there will be a panel struck. The users and the department would agree on a three-person panel to hear the arguments of both sides. They would then submit a report.
If it were up to me, I would say that that report would not be binding on the government but would form part of the package of information that would be tabled in Parliament.
I have been very clear with the users. I know that how they will actually act in the final analysis is unknown, but I believe they understand that if they use it in a frivolous way, it will quickly disappear.
They are looking for a meaningful process. Right now, if they have a concern with a user fee, it just goes to an interdepartmental review and comes back. There has been no progress of which I am aware on any of these disputes. They are reinforced from within.
This sets a more independent and objective process. I do not see it as being binding or hugely litigious.
[Translation]
Senator Ferretti Barth: You spoke about jurisdictions like the United States and Australia. Who are Canada's major trading partners?
Mr. Cullen: As I see it, user fees are a key factor. For example, with respect to pharmaceuticals, Canada's main trading partners are the United States and the United Kingdom. In some cases, the standard does not apply.
[English]
There are some fees that are not relevant in terms of our major trading partners. In many cases, I think it will be a useful exercise for the department or agency to undertake. For example, when looking at the fees to enter a federal park, is it relevant to compare the fees to get into a park in the United States? Maybe yes, maybe no. At least we should know that and have a rationale.
In the case of access to the government procurement system, what does it cost in the United Kingdom for a small business to access the procurement system on-line? It is useful information. The department will have to make their case if they think it is irrelevant or that we are comparing apples and oranges. I guess the short answer is it depends.
[Translation]
Senator Ferretti Barth: As far as user fees are concerned, will this bill create some competition among trading partners? For instance, a fee is charged to visit national parks in both the United States and Canada. To avoid competition, should the same user fees be charged in both countries?
[English]
Mr. Cullen: The comparison with major trading partners is particularly relevant if, for example, you are looking at the approval of drugs or new chemicals — I could go on and talk about veterinary products and medical devices — where we are not competitive with the United States. The time it takes to get a drug, veterinary product or medical device approved here is much longer and the fees are roughly the same. Why would an international company looking to set up a global product mandate come to Canada if it will cost the same to get the drug approved but take maybe twice as long? As a result, we are losing investment and jobs in Canada.
I think it will do more than create competition among our trading partners. It will make us more conscious that we need to be internationally competitive, especially as it relates to those services that are relevant in terms of our trading partners.
[Translation]
Senator Ferretti Barth: Your proposed legislation, Bill C-212, calls for more oversight of user fees, which would be reviewed by a House of Commons committee. What would be the cost of implementing Bill C-212? What would it cost to have a House of Commons committee review user fees?
Mr. Cullen: Are you talking about the dispute resolution process?
Senator Ferretti Barth: Yes.
Mr. Cullen: That would depend on the number of disputes to be settled and on how the process is set up. For example, a process that takes into account users could be developed.
[English]
If a panel concludes that the user complaint was not valid, then you could have a mechanism whereby the users pay for the panel's costs. Likewise, if the government were shown to be unreasonable in terms of the fee or performance standard, then the government would be responsible.
It depends on the number of disputes and how you organize that process within government. It is difficult to say.
Senator Doody: Mr. Cullen, I should congratulate you on your initiative in bringing this proposed legislation forward. Anything that helps to make government more responsible to Parliament is a very worthwhile undertaking. This must have taken a great deal of energy and time on your part.
What interests me is the panel concept that you talked about for determining whether the user fee was competitive or reasonable. I can understand how that will work in Etobicoke North with the drug companies, who know exactly where they stand in terms of their competition. Could you extend that description to include the icebreakers, for instance, on the east coast of Newfoundland? Who will determine how much it should cost to get food supplies into Belle Island or Lewisporte in the event of an ice blockade? Or, how do fishermen, who are expected to pay a wharfage fee or harbour fee for something they have been using for generations, know what is fair? They will not know what is competitive because they do not know what they will have at the end of the day when they come back in to use the wharf for which they have paid. Do you visualize these particular stakeholders as having some input into the establishment, increase or expansion of fees? There has been little or nothing in that area up to now, to my knowledge. However, I am sure you looked at that when you were doing your research.
Mr. Cullen: Thank you for the question, senator. My bill would require that this kind of consultation take place. The fact that there has been very little over the last number of years is probably a result of the fact that we often go through a consultation process in government, but you wonder if anyone is actually listening. I suspect that the users, the stakeholders, would have to come together and decide whether they thought the new user fee or the increase was reasonable.
What is reasonable? It seems to me that there should be some private benefit being conferred. There should be a clear definition of what costs you are trying to recover. I suspect that, even in some of the areas to which you have referred, there are benchmarks with some of our major trading partners. Part of the challenge is comparing apples with apples, but I think that you could find some examples.
I heard an example the other day of where we are providing icebreaking services to some U.S. ships coming through the Great Lakes, but not to Canadian ships. I am not sure if I have the facts right, but that kind of thing is surely a competitive issue, so I think there are comparisons we can make. It means that users who are average citizens will have to organize themselves in some shape or form, because these matters are not all straightforward. However, if people have the will, if they feel that a charge is unfair, they should get together and take steps to fight it.
Senator Doody: Do you visualize some sort of obvious storefront process, tribunal or committee to which fishermen, the mayors of some ice-bound municipalities or the owners of some small shipping companies on the coast can go to explain their position? We cannot establish a competitive advantage with a major trading party when we cannot get in or out of our ports. Do you visualize someone to whom they can go? Or will fee increases be published in public notices?
Mr. Cullen: The idea behind this bill is to give a higher profile to proposed new fees or increases by tabling them in Parliament with all these questions addressed by the department or agency. How does it compare with trading partners? What costs are we trying to recover? To me, that would be the vehicle.
I take Senator Comeau's point about the Senate, but let me speak for a moment in terms of the House of Commons and how I see that working. That package would be tabled in the House of Commons. Let us say it is fees relating to fisheries. That would then go to the Fisheries Committee. If the users had a concern with that fee, that would be the time — before 40 days are up — to go to the members of that committee and say, ``We do not agree with this fee. We think it is not internationally competitive. We think there are costs in there that are not applicable to us.''
We would want the committee to review this and then report back to Parliament. If there were an impasse between the users and the department, then it would call for an independent panel to look at it objectively and report back.
Senator Doody: I can see that, and it sounds reasonable and sensible and quite an improvement. Nevertheless, will the people directly affected know that this fee schedule has been presented to the Fisheries Committee in the House of Commons? There are very few notices about fisheries committees published in Hibbs Hole or Blow-Me-Down or such places. These are the people who will pay for this.
Mr. Cullen: Even under the current process, these fees typically have to be gazetted. An average fisherman in Newfoundland would not be reading the government Gazette all the time.
Senator Doody: It is not mandatory reading.
Mr. Cullen: The problem with that process now, and I have talked to many users, is it goes through a special committee of cabinet, and they have made representations even after fees were gazetted, but there has been very little progress.
The short answer is that people have to be watching for these things. I would have thought that fishermen would have associations or organizations that are being paid to track this type of thing. Someone has to notice there is a change.
My bill gives you a better chance to notice. Currently, these fees and changes sort of pass through the bureaucracy and to the special committee of cabinet, and even though they are gazetted, before you know it they are in play.
Senator Doody: I appreciate your point. This is an improvement over what we had before. We will have to watch and see how it works.
[Translation]
Senator Gauthier: In essence, we are talking about a regressive form of taxation where the same fees are charged to everyone, regardless of individual income level. I examined the components of the bill closely and a number of questions came to mind. Our researcher has prepared an excellent backgrounder for us.
First of all, I would like to draw a comparison with our competitors, specifically the United States, which accounts for approximately 87 per cent of our trade. The government oversees user fees, much like it does taxes. In some respects, it has a monopoly over benefits, goods and services. Why should the mechanisms set out in Bill C-212 be comparable to US procedures? Why should the process be standardized? Why should we have to justify higher charges or try to match US fees?
[English]
Mr. Cullen: The intent of this bill is to provide greater clarity around the user fees and performance standards in Canada and how they compare with our major trading partners. We have heard often of this concept of harmonization — that would be an entire other debate, whether we should be harmonizing in all these areas. I have some concerns about harmonizing just about everything with the United States. I know there are some moves afoot to try to harmonize some of these regulatory regimes.
For example, it is often difficult for a company that is getting a drug or a new chemical approved in Canada to use data drawn from the United States, and so we have often these processes being reinvented, at considerable cost.
However, my bill does not really deal with the question of harmonizing the user fees or the performance standards. It deals with ensuring that our user fees and the performance standards are competitive with our trading partners.
[Translation]
Senator Gauthier: Your bill may not say anything about harmonizing fees. However, the minister would have to justify, where necessary, proposed user fees or ensure that fees are comparable to those charged by our trading partners. If the minister must provide justification for these charges, why then must the government or the relevant minister compare the fees with those charged by the trading partners, if fees in Canada vary or are higher?
Canada is a vast country with a relatively recent history. How can we justify user fees, for example, for a specific good, by drawing a comparison with the United States, which accounts for 87 per cent of our trade volume? The relevant minister would have to justify any discrepancy between US and Canadian fees. Just how would he do that?
[English]
Mr. Cullen: I think, for example, if we are looking at getting a drug approved in Canada, and the performance standard here is 700 days and in the United States it is 400 days, but the fee is either the same in Canada or higher, then the minister needs to explain why that is the case. My bill does not make it mandatory that the fee or the performance standard be equivalent to our major trading partners. It says the minister needs to explain why there is a difference. There is no veto if the explanation is not satisfactory. However, if the explanation is not clear enough, or concise or convincing, then the users would be entitled to challenge that, and if we are approving drugs or new chemicals in Canada, to ensure that the environment here is conducive to that type of enterprise.
Senator Gauthier: I come back to what was described as the legal approach versus the rules approach. I spent a few years in the House of Commons. It will be a very challenging situation if every fee comes up for discussion. I know the game. It will not be a very simple thing to do. Most members of Parliament do not have the time or the resources. We will have to depend on other people.
When I look over my dossier today, I notice that no consumer group wrote me a letter or told me anything about this bill. Most are from businesses or research-based pharmaceutical companies, and most of them, I would say, endorse the bill. I do not have any objections to that.
However, I put this in terms of parliamentary responsibilities. Do you really believe the House of Commons, which will be involved here, has the resources to do this kind of constant review and hear constant appeals, or will we let the courts decide? Increased judicial measures will just create a heck of a situation. Still, it will not take 750 days for a new drug to be approved. It will probably take longer than that because the courts will be involved, and you know how lengthy that process is. If it is a tax, it is a tax; if it is a fee, it is a fee, and I think it should be universal in its application and, if possible, adjusted to the means of the people.
Mr. Cullen: In those countries that have made a clear linkage between performance standards and user fees, like the United States, the United Kingdom and Australia, the agencies and departments meet the performance standard in almost every case.
When the bill was before the Finance Committee in the commons, we asked Treasury Board how many user fees would fit under its application, and I think the answer was about 10 or 12 last year, so I do not think this will create a huge workload.
When the members of Parliament have this information, they can decide amongst themselves whether there are sufficient grounds to pursue it further. The parliamentarians will not be doing a lot of this work. It will be the minister, in your example, who will be responsible for doing the comparisons and the analysis. If parliamentarians are happy with the explanation, so be it. If they are not happy, they have every right and a duty to pursue it further.
Senator Gauthier: I know this is irregular, but I have 40 questions. We have a good researcher. Would you mind if I sent you a copy of those questions, so we have the benefit of the answers before we go to a third reading?
Mr. Cullen: I would be happy to do that.
The Deputy Chairman: Send them to our clerk. That would be fine if you could do that for us.
[Translation]
Senator Biron: In what way does this bill guard against the danger of giving too much power or influence to users in regulatory matters at the expense of the public interest? In the event a regulatory body wanted to established new cost procedures, what could users do to oppose cost increases? Would this procedure not adversely affect the public interest?
Mr. Cullen: In my opinion, government departments and agencies have a responsibility to provide information arising from the bill, to explain user fees and costs, as they compare with those of our competitors and to justify the introduction of such user fees.
[English]
These are valid questions. We have a situation where the users feel they have had no recourse whatsoever over many years. I think the bill brings more balance to that situation. I do not think it necessarily creates a bias in favour of the users. It creates more of a level playing field between these monopolies that are charging these fees, in many cases in the public interest, and the users who have no option. If you want to get a drug approved in Canada, you go to Health Canada. If it is a new chemical, you go through the same process.
These are like taxes. When they are being priced by monopolies, the users have a right to some input or recourse.
The Deputy Chairman: Thank you. We have run out of time.
This has been helpful, Mr. Cullen, and on behalf of the committee, I thank you for appearing today. The clerk of the committee will send that material to you.
I had some questions pending, so perhaps we could add them to the list: Have you considered the role of the Joint Committee on the Scrutiny of Regulations in terms of user fees? If so, what was the result of your investigation? We received a note from Treasury Board saying that they do not support your initiative. Have you analyzed the September 3 policy of Treasury Board? Could you tell us why you do not support their initiative? It would be helpful to the committee to have those answers. Treasury Board officials will appear before the committee to give testimony on the bill. Perhaps you could stay in touch with any new comments that arise.
Mr. Cullen: That would be fine.
The Deputy Chairman: The next witnesses are from the Canadian Nuclear Safety Commission.
Ms. Linda Keen, President and Chief Executive Officer, Canadian Nuclear Safety Commission: Good morning, Mr. Chairman and senators. My name is Linda Keen and I am President and Chief Executive Officer of the Canadian Nuclear Safety Commission. With me today are Ms. Irene Gendron, Senior Legal Counsel, and Ms. Kelly Gillis, Director General of Finance. Today I will provide you with the views of the CNSC on Bill C-212.
[Translation]
Before I proceed, allow me to explain briefly the context in which the CNSC operates and our cost recovery program.
[English]
We have recently revised our cost recovery and so we are a living example of the current cost-recovery program. The CNSC is an independent agency and quasi-judicial panel of the Government of Canada. We have a staff component of 500, mostly engineers and scientists. The CNSC is the only nuclear regulator in Canada and has no provincial counterparts.
[Translation]
The CNSC neither advocates nor opposes the nuclear industry but regulates it in the public's interest. It regulates virtually all activities related to the use of nuclear energy and nuclear substances in Canada, including nuclear power reactors, uranium mines, mills and refineries, and medical uses, among other things.
[English]
The CNSC derives its authority from the Nuclear Safety and Control Act, 2000. The CNSC regulates approximately 2,200 licensees, of which approximately 1,700 are charged fees. The CNSC estimates that it will collect approximately $40 million in cost-recovery revenue for the year 2003-04, which is approximately 55 per cent of our total operating costs. At the end of the phase-in period, 2007-08, the CNSC estimates that its overall recovery rate will be 70 per cent. All fees go to the Consolidated Revenue Fund. The CNSC has recently completed a lengthy and consultative process in setting new cost-recovery fees. The fees have been updated to ensure that they are appropriate. The new fee regulations came into force in July 2003.
In developing its new cost-recovery program, the CNSC evaluated a number of alternative fee-setting methodologies used by other Canadian and international government regulatory agencies. It has taken into account the changes in the scope of its regulatory activities and has reviewed all of its activities subject to the cost recovery, based on Treasury Board guidelines. Our updated cost-recovery fee regulations were drafted in accordance with the Treasury Board Secretariat's 1997 cost-recovery and charging policy. However, they have been confirmed as meeting the new, revised external charging policy.
The process for setting new fees included the establishment of an advisory group that included representatives of all licensees subject to user fees. This group recently endorsed the CNSC's process as being comprehensive and fair. This group will continue to exist and provide the CNSC with input and guidance on the implementation of the revised fee regulations.
[Translation]
To ensure the appropriateness and fairness of the new fee structure, the CNSC has asked the office of the Auditor General to conduct an audit of the new fee structure. The CNSC has committed to sharing the results of this audit with licensees.
[English]
Our cost-recovery fees reflect the time and effort expended by the CNSC on regulating licensees in the nuclear industry. Who our client is, is not straightforward, as Bill C-212 would presume. Our client is not the licensee but the Canadian public.
I will speak now to our views on Bill C-212. The underlying objectives of Bill C-212 — improving accountability, transparency and service delivery — are ones that the commission can readily support. However, there are a number of provisions in the bill that would have significant impact on the independence and effectiveness of CNSC as Canada's nuclear regulator. For example, the bill calls for an independent dispute-resolution process to address complaints or grievances submitted by so-called ``clients,'' who for us are not clients, regarding user fees or charges. An immediate issue related to this provision is that the CNSC's relationship with licensees is not one of service provider and client. The bottom line is that our one and only client is the Canadian public.
Of much more significance is that this requirement would undermine the role of CNSC as an independent regulator. The independent dispute-resolution process in Bill C-212 would give another body outside the CNSC the ability and responsibility to make a final decision on the regulatory mandate of the CNSC and on how much regulatory effort is appropriate in a given case. This is not the job of anyone but the CNSC. Regulation of the nuclear industry requires highly specialized expertise that the CNSC goes to great lengths to acquire and retain. If the proposed dispute- resolution mechanism were to proceed, the CNSC would not be able to assure the Canadian public that the safety of nuclear facilities would be maintained to established standards. In essence, the dispute-resolution mechanism would control the level of effort and the quality of oversight.
A key consideration is whether this dispute-resolution mechanism would accept the accountability to the Canadian public for reducing or changing the oversight of their safety.
Bill C-212 calls for the establishment of standards to measure the performance of the regulating authority, and as Mr. Cullen has stated, these would be comparable to Canada's major trading partners and strictly based on efficiency — doing things fast rather than right.
[Translation]
The CNSC does recognize that standards of effectiveness and efficiency in managing the regulator/licensee relationship are a reasonable expectation, and we are developing such standards and a set of performance measures as part of on-going improvement initiatives.
[English]
The particular requirement in Bill C-212 is to establish standards comparable to Canada's major trading partners. This would constrain our role as a health and safety regulator. The strategic vision of the CNSC is to become the best nuclear regulator, not to reach the denominator, which could be lower, that other organizations in the world attain. This is problematic because it lacks clarity. For example, would each regulating authority have to measure itself against all other agencies or authorities in various countries, or just authorities with like mandates? This lack of clarity would cause legal uncertainty. An inconsistency in the application of the bill would not be in anyone's best interests. The CNSC does work closely with regulators of other countries, including on the development of international standards.
The bill also requires that the minister table a proposal in the House of Commons to explain the subject of the user fee, the reasons for any changes and the performance standards to be used, and provide estimates of the amount of fees to be collected for the first three years. If the Minister of Natural Resources were to be considered as CNSC's minister under Bill C-212, that would pose further problems for our independence as a regulator. The CNSC reports to Parliament through this minister, but not to this minister, and we retain our independence as a regulator.
It would be difficult to require the minister to provide justification for fees set by the CNSC. The bill calls for mandatory reduction of fees when the regulating authority does not meet the established performance standards by a percentage greater than 10 per cent. The user fees would be reduced by a percentage equivalent to the unachieved performance, to a maximum of 50 per cent.
This clause would also cause difficulty for an organization such as the CNSC, where performance standards cannot, for reasons of health and safety, be measured in purely numeric terms. The bill does not specify the mechanism to be employed to reduce the user fees and leaves open the question of who determines whether the performance standard has been met or not.
I have raised today the main substantive concerns of the CNSC with this bill. In addition to those substantive comments, analysis of the bill shows numerous drafting inconsistencies and errors that lead to legally uncertain and inconsistent application. We would be pleased to outline these to you in writing. I have not focused on how the provisions of the bill relate to existing government policy. Treasury Board will be appearing before you to discuss that.
In conclusion, honourable senators, the CNSC appreciates the opportunity to speak today on what we consider an important issue. I would like to restate that under Canada's nuclear regulatory regime, licensees who operate in a safe manner lower the cost of regulation and reduce their regulatory burden. There is an onus on licensees to pursue a culture of safety that generates the trust of both the regulator and the public.
I hope I have demonstrated that the CNSC does not operate in a vacuum. While our client is the Canadian public, we respect the operational realities of our licensees and have made attempts, through our process, to reconcile these in an open and transparent manner. However, Bill C-212 would have numerous deleterious effects on CNSC as a regulator and quasi-judicial tribunal. If the bill were to proceed in its current form, the effectiveness of the CNSC would be significantly affected and our independence would be undermined. This would result in a significant risk that the CNSC would not be able to deliver on its mandate related to the health, safety and security of Canadians as it pertains to nuclear energy and substances.
It appears that the bill was drafted solely with commercial application in mind and health and safety regulations have not been considered. As the CNSC regulates for health and safety, the key requirements of this bill are not appropriate to the CNSC. Smart regulation under the Nuclear Safety and Control Act must serve the public good and maintain trust in the regulator.
Thank you very much, Mr. Chairman, and we would welcome your questions.
The Deputy Chairman: I appreciate your offer to provide answers in writing to anything we are not able to handle here during the question period.
Senator Comeau: Did you say that the CNSC reports to Parliament through the minister, but does not report to the minister?
Ms. Keen: Yes. If I may, Mr. Chair, I will add a couple of words to this. What this means in a practical sense is that the minister is responsible for tabling our reports in Parliament, including the annual report that we have provided to you today. He is responsible for forwarding the regulations, including the cost-recovery fee regulations recently passed, through Parliament and to parliamentary committees. However, when it comes to the day-to-day regulation of the industry, the Nuclear Safety and Control Act has entrusted to this quasi-judicial, independent tribunal the responsibility to set standards and regulations, to issue licences and to ensure that the Canadian licensees meet the standards. The minister has no part to play in that process.
Senator Comeau: That statement almost suggests to me that you should be quite supportive of Bill C-212, because if you had to justify what you are doing before a House of Commons committee, it would give you the opportunity to report to a body that is beholden ultimately to the client, which is the Canadian public. Given that the minister has no power over your semi-judicial body, you might want to have confirmation from a House of Commons committee that this is a good fee or not a good fee. I am playing devil's advocate, but I would think you would welcome that kind of public scrutiny of what you do.
Ms. Keen: The question is extremely important because the CNSC was set up under a requirement for openness and transparency, and the quasi-judicial administrative tribunal provides that openness and transparency required by the Canadian public for this important industry. The Parliament does have an opportunity, through the act, to set the parameters under which the tribunal and the commission work. It is an international standard for nuclear regulators that they must perform independently from the daily scrutiny that could be offered by politicians and parliamentarians, so in fact, it would do the opposite.
The fact that we would have to report on the way in which the commission acts to parliamentarians or to the minister would be the same thing for us. It would reduce the independence of the tribunal, which has been entrusted by law to make those decisions in an open, transparent, but independent fashion, away from scrutiny. We report to the public and to the House on the way in which we work through our annual report.
Through this committee of licensees, which meets quarterly, we continually justify how the fees are put in place. Licensees have an opportunity to view their fees and how they are set via the Web. Their fees are based on the real daily effort of the commission.
Ms. Irene Gendron, Senior Legal Counsel, Canadian Nuclear Safety Commission: I have one comment on the way that the bill is drafted. The minister would have to justify the fees and report the figures to the committee. That is awkward for a tribunal, from an independence point of view, when the minister does not have that kind of role as a legislator.
Senator Comeau: I will have to wrap my mind around this again and review the legislative authority of the CNSC.
You talked about serving the clients of the CNSC rather than the licensees. I wonder then if other departments face this kind of thinking as they set policies. The Department of Fisheries and Oceans immediately comes to mind because it is a parallel to the CNSC in that respect. For example, in New Zealand the fishery has been almost completely privatized. Fishers control the science, the quotas, et cetera so that New Zealanders have no say in those elements. The excuse for that is ``user pay, user say.'' As Canada progresses toward a privatized fishery, could we face the same kind of situation, whereby a small segment of society, the fishers, decide on the quotas because they pay the fees. Have you looked at other parallels?
Ms. Keen: Mr. Chairman, although my background is in agriculture and natural resources, I will confine my comments today to my role as the President of the CNSC. I do not think it would be appropriate for me to comment on other parts of the economy. I would say that other parallels could be drawn throughout the federal government in terms of responsibility for health and safety. Certain other departments, although less so than independent tribunals, are set up to ensure the health and safety of Canadians.
Senator Comeau: And to ensure the protection of renewable resources.
Ms. Keen: I was just going to add that we do not have any responsibility for any of the economics of the industry. We are not required to be either for or against. That clarity of purpose allows Canadians to have trust in the regulator as not having any commercial interests. Bill C-212 would have an effect on other regulators, but the CNSC is quite unique in its quasi-judicial responsibility for health and safety only. The impact of Bill C-212 came to our attention immediately, and that is why we are honoured to appear before the committee today.
The Deputy Chairman: We appreciate you taking the initiative. Is the Atomic Energy Board a predecessor to the CNSC?
Ms. Keen: Yes. When the Nuclear Safety Control Act was enacted, the new name of the commission, the Canadian Nuclear Safety Commission, was put in place. It also prevented some mix-ups that had occurred between AECL and the CNSC.
[Translation]
Senator Gauthier: I am not as well versed as I would like to be in this matter, but I have participated in similar discussions in the past. I take it from your answer to Senator Comeau's question that you are not a senior government official, but rather someone who works for a quasi-judicial tribunal.
You perform certain duties and are accountable to Parliament through a minister who presents the CNSC's annual report. Five senior parliamentary officers may table their annual report to Parliament, but you cannot do this on your own.
Ms. Keen: That is correct.
Senator Gauthier: I believe you also stated that all user fees collected by the CNSC go directly into the Consolidated Revenue Fund.
Ms. Keen: Yes.
Senator Gauthier: Therefore, you have no vested interest in raising fees since the money does not go directly into the CNSC's coffers. Correct?
Ms. Keen: I don't disagree with you at all. This is one way for the CNSC to maintain its independence. Like all other government agencies, it submits a budget for approval every year. This approach is one way for the CNSC and for its licensees to maintain their independence. Licensees have a very clear idea of the fees charges and of the documents used to set licensee fees.
Senator Gauthier: Earlier, you told us that you had asked the Auditor General to conduct an audit of the new fee structure. Did I understand you correctly?
Ms. Keen: Yes, you did.
Senator Gauthier: Why are you doing this?
Ms. Keen: It would give us some added assurance that our cost-recovery formula and system are effective in terms of answering licensee inquiries. I can appreciate the need for licensees to understand the nature of the new fees structure. This is one way for us to ensure that the process is transparent for them.
Senator Gauthier: I understand accounting and transparency issues and Mr. Cullen's bill. He is seeking to enhance parliamentary oversight. On page 26 of your 2002-2003 annual report, the following is noted:
The CNSC also made considerable progress towards introducing new cost recovery fees regulations this year. The new fees regulations will enable the CNSC to update fees annually in line with changes in activity levels and costs [...]
Will this report be available in March of 2004?
Ms. Keen: Yes. Ms. Gillis was in charge of the cost recovery program in June of this year.
[English]
Ms. Kelly Gillis, Director General, Finance, Canadian Nuclear Safety Commission: This year we passed our cost- recovery fees regulations and published all of our costs in line with our budget. We opened our books to our licensees so that they are able to see the exact undertakings of our work and its cost. We will provide that information annually to licensees so that there will be no discrepancy and no hidden costs. Our books will be open.
[Translation]
Senator Gauthier: In short, are you in favour of, or opposed to, Bill C-212? If I understand correctly, you oppose the bill?
Ms. Keen: We are opposed to the bill as it is presently worded. I understand Mr. Cullen's position very well because transparency is also important to the CNSC.
[English]
The Deputy Chairman: Since our time is up, I would like to thank you all very much for being here. As I understood the primary thrust of your presentation, you are a little different from much of what was contemplated in the bill, from the way Mr. Cullen was speaking. User fees are such a large part of your operating revenue — 55 per cent going to 70 per cent — that it might put you in a different situation from that contemplated in Bill C-212.
In any event, you offered to send us a letter if you wish to raise any other items or other points. You heard Mr. Cullen, and all of our proceedings will be available during these hearings. You may see points that you think you could be helpful in commenting on — specifically, whether there could be some changes to Bill C-212 that would make it possible for you to work within that regime, or whether your independence would be so compromised that the only solution would be for you to be excluded. If you could comment on that, that would be very helpful.
Thank you for your initiative in being here, and for your presentation today.
The committee adjourned.